Last week we released the August edition of our Numbers You Need bulletin. In addition to tracking monthly and quarterly trends in employment, inflation, work support programs. state revenues, and foreclosures, each issue also looks at annual data for one key measure of Oklahoma’s prosperity and well-being. This month we looked at the state prison population. At the end of FY ’09, the state reported 25,197 offenders in prison. The good and surprising news in that number is that it represented an increase of only 59 inmates, or 0.2 percent from the end of FY ’08, and an increase of just 119, or 0.5 percent, from two years previously.

As can be seen from the graph, this leveling in the number of prisoners is a departure from the trend of recent years. From 2000-2007, the inmate count grew by an annual average rate of 1.5 percent. The slowdown was unexpected: when MGT of America released its major audit of the Department of Corrections in early 2008, the inmate population was projected to grow to 27,035 by the end of FY ’09, on its way to a total of just under 29,000 prisoners by the end of FY ’16. In both news accounts and follow-up conversations, DOC Director Justin Jones attributes the slowdown to two factors: a reduction in the number of offenders being sent to prison for probation violations due to creative policies being implemented by DAs in Oklahoma County and elsewhere; and new policies that allow prisoners not to lose earned credit towards release for certain misconduct.

In 2007, the most recent year for which national data was available, Oklahoma imprisoned 665 people per 100,000 population, compared to the national average of 506. Oklahoma’s female incarceration rate that year was more than twice the national average and highest in the nation. Our heavy reliance on incarceration has social, economic, and fiscal consequences that will remain an ongoing challenge for policymakers and communities to address in the years ahead. However, that progress is already being made in keeping in leveling off the inmate population deserves to be noted and celebrated.

We hope you’ll check out the full edition of August’s Numbers You Need.

Last month Oklahoma Policy Institute was invited by McCurtain Memorial Hospital in Idabel to give a presentation on poverty as part of a monthly lecture series that the hospital has convened to examine pressing social problems facing their area. Our presentation was prepared by Mariah Levison, a graduate student in International Affairs at Washington University in St. Louis who has been working with OK Policy this summer. Mariah here summarizes some of the data and theories on the causes of  poverty in McCurtain County.

McCurtain County, Oklahoma’s southeasternmost county, also is one of the poorest counties in the state. McCurtain has the third highest poverty level in the state. One in every four residents of McCurtain County lived below the federal poverty level, $22,000 for a family of four, in 2007. The unemployment rate in McCurtain was 10 percent in May of this year. Additionally, McCurtain experienced a population decline of -2.5 percent between 2000 and 2008. During that same time period Oklahoma grew at a rate of 5.6 percent.

To understand poverty in McCurtain County, we have to start with the county’s rural nature. According to The United States Department of Agriculture Economic Research Service (USDA ERS) rural areas tend to be poorer than urban areas, with 14.2 percent of the rural population being poor compared to only 11.6 percent of the urban population. Nationally, the rural poverty rate has exceeded the urban rate every year since poverty was first officially measured in the 1960s. Furthermore, USDA ERS calculates that the poverty rate–16.8 percent–is highest in counties like McCurtain , that are not adjacent to urban counties. The vast majority of poor rural counties are in the South, like McCurtain County.

continue reading Surprising causes of rural poverty

OK Policy focuses not just on budget and tax issues, but on finding ways for government and households to work together to make Oklahoma and Oklahomans more prosperous. One great example of this kind of partnership is 529 college savings plans. These state-managed savings plans are open to everybody who can come up with the $100 initial deposit. Savers can deduct their contributions to the account (up to $10,000 per year) from their Oklahoma state income taxes. If the account is used for qualified education purposes, all the money it earns over the years is exempt from both state and federal income taxes. So the federal and state government have established a system to encourage saving for college and to make it easier by managing the plans. Families just have to take advantage of this structure.

That’s easier said than done. In 2002, the last year for which we have data, only 4,420 Oklahoma tax returns–about 1/3 of one percent of all returns filed–reported contributions to a 529 plan.Most of those who did contribute were from higher income brackets; over half of all contributions were from families making $70,000 or more.

One of Oklahoma’s biggest needs is higher educational attainment. As the economy changes, college and technical education are more and more essential to family security and a growing economy. OK Policy is committed to making education more attainable and more effective. 529 plans are one path toward that goal. We can broaden participation by improving policy, but we also need to broaden awareness. Here’s a video  on starting a college savings plan by Tammy Trenta, whose credentials are led by being a contestant on The Apprentice. Still, it’s a good example of financial planning made simple, which will be one thing we have to do in order to open 529 participation up to all Oklahomans regardless of income and assets.

As you’ve no doubt already heard, the worst fears about state revenue collections in the beginning of the new fiscal year were confirmed yesterday with the release of July General Revenue (GR) collections. The Treasurer’s office announced that July revenues were down 26.3 percent compared to a year ago and came in 18.1 percent below the certified estimate upon which current year appropriations were based. This year’s July GR collections were not only $120 million below last year’s; they were the lowest since FY ’03, at the depth of the previous recession, without adjusting for inflation or the growth in the overall state budget in the intervening years. The sole glimmer of good news in yesterday’s announcement: July’s 26.3 percent decline in revenue collections compared to the same month in the prior year was actually slightly less than the year-to-year declines suffered in June (- 30.1 percent) and May (-27.7 percent). This suggests that the state budget may have already hit rock bottom. However, the climb back up will likely be long and will definitely be hard.

July’s revenue shortfall led Treasurer Scott Meacham to implement an immediate 5 percent across-the-board cut to agency appropriations for the month of August. The Treasurer said that he will be meeting with Governor Henry and legislative leaders to discuss how to handle the budget crisis, stating:

“We have several options. These include potential use of the Rainy Day Fund, tapping additional federal stimulus money and other responses,” Meacham said. “However, I would warn state agencies that additional cuts may very well be coming.”

For now, implementing cuts to all agencies in equal proportion to their share of appropriations from the GR fund is the only course that is constitutionally available. This approach, however, is unable to take into consideration the differing capacity that agencies have to absorb budget reductions and the differing impact of potential cuts on services that are essential to the health, well-being, and security of Oklahoma families and communities. In a blog post last month, OK Policy suggested an approach for dealing with shortfalls, including being ready to call the Legislature back into Special Session in the fall and tapping the Rainy Day Fund to minimize the extent and severity of cuts. We will continue to monitor the budget situation closely, and in collaboration with policymakers and partners in the community, be working to develop recommendations and strategies for how to proceed.

I recently attended a meeting of the state’s Incentive Review Committee. This board of citizens is appointed by elected leaders to review some of the hundreds of tax incentives we give to encourage specific economic activities. Dr. Larkin Warner, a member who also is a retired professor of Economics at Oklahoma State University, called the committee’s attention to two research approaches and current views on state tax incentives for businesses.

In the July 13 & 20 edition of Business Week, Jessica Silver-Greenburg asks Will Tax Breaks Boost State Jobs? She points out that incentives are a zero-sum game. Michigan might be better off for keeping a GM plant by spending $44 million in tax money, but the country is not.While state economic development officials defend the programs as essential to the state’s economic future,  Greg LeRoy of Good Jobs First, contends:

It’s a net-loss game for state and local governments. The only winners are the companies playing the tax game.

continue reading Tax incentives–Why not hold them to the same standard as other spending?

Note – Occasionally we plan to re-run blog posts on topical subjects that you may have missed the first time around. Recently, the Annie E. Casey released its annual Kids Count report measuring how states are faring on a range of indicators of child well-being . As the Tulsa World reported, Oklahoma’s overall ranking dropped to 44th  and we fared worse on 6 of 9 indicators than we did in 2000.  In this June blog post, we examined the disparity between our state’s growing wealth and persistently poor performance on measures of personal and social well-being.

Back in March, the Bureau of Economic Analysis released 2008 data on state personal income, which is the most widely used measure of a state’s relative prosperity. We took note of it at the time in our April Numbers You Need bulletin, focusing on Oklahoma’s rank as the state with the fourth strongest rate of growth in  personal income (5.4 percent) for the year.

Perhaps the bigger story, which hasn’t received much attention,  is that the state’s strong economic growth over the course of this decade has propelled Oklahoma from near the bottom to the middle rungs of states in per capita personal income. As recently as 2000, Oklahoma ranked 42nd in state per capita personal income at $23,582. Between 2000 and 2008, Oklahoma’s per capita personal income jumped 51.2 percent, fourth among the states behind only Wyoming, Louisiana,  and North Dakota (all, not coincidentally, states that have shared in the boom in mineral prices of recent years). As of 2008, Oklahoma ranks 28th with per capita personal income of $36,899, which is less than $3,000 below the national average of  $39,751. Oklahoma ranks above every southern state except Florida and Texas, and has surged past not only declining Rust Belt states like Ohio (32nd), Michigan (34th)and Indiana (39th), but also such seemingly dynamic southern and western states as Oregon (31st), North Carolina (36th), Georgia (40th) and Arizona (42nd).

continue reading Summer Re-run: Oklahoma is not a poor state – we just continue to play one on TV

Like most people who watch public budgets, we tend to focus on what is being spent, at the expense of what is being bought. Our upcoming Online Guide to Oklahoma Budget and Taxes looks at state and local expenditures more broadly than the traditional view. For each of six functional areas, the Guide reminds us why we have asked government to take some responsibility and what we hope will result from this collective effort. Then we offer some measures we can use to check progress.

Here are some excerpts from our section on Health and Social Services:

Human, health and social services provide the safety net that is essential to our society. Most Oklahomans agree that government should insure that vulnerable individuals and families can meet their basic needs. It also should promote healthy lifestyles that reduce public and private costs.

Our measures of success in this area suggest we have work to do.

• 15.9 percent of Oklahomans are poor, according to the federal definition, compared to 11 percent nationwide.
• Oklahoma ranked 43rd in overall health in 2007, according to the United Health Foundation.
• 18.7 percent of Oklahomans did not have health insurance in 2006, making Oklahoma 5th highest in uninsured population.

continue reading What are we buying? Effectiveness measures from our upcoming Online Guide

Note – Occasionally we plan to re-run blog posts on topical subjects that you may have missed the first time around. Last week brought word from DHS that the number of confirmed cases of child abuse and neglect in Oklahoma plunged last year to 8,618, a drop of 26 percent from last year, and a full 40 percent fewer than at the start of this decade. We reported on the encouraging decline of child abuse cases and possible factors explaining the trend in this post from June (the graph has been updated):

We’re out with our latest Numbers You Need bulletin for June, tracking economic and fiscal trends in Oklahoma and the nation. While the bulletin focuses on monthly and quarterly data on jobs, inflation, work support programs, and the like, each month we present annual data on some indicator of Oklahoma’s general prosperity and well-being. This month we look at the trend in the annual number of confirmed cases of child abuse and neglect in the state. The news is decidedly encouraging.

Last year’s total of 11,714 confirmed cases of abuse and neglect is the lowest this decade. The rate of child abuse and neglect cases – 13.0 per 1,000 children in the population -  is the lowest since FY ’94 and is down 35 percent from the peak rate of 20.0 confirmed cases of abuse and neglect per 1,000 children in FY ’98.

continue reading Summer Re-run: Child abuse and neglect numbers moving in right direction

It will be worth your time to check out Better, Faster, Cheaper, a blog produced by former Indianapolis Mayor Steve Goldsmith for the Kennedy School of Government. Among its gems is an excellent article by William Eggers, The Pension Time Bomb — Part I. Even Eggers, co-author of a book on the subject, has a hard time understanding the cost implications of public pension plans:

The hole in which most states and municipalities find themselves in is massive. How massive? It is difficult to tell with any precision…There is no disputing, however, that the scope of unfunded pension and retirement health care obligations facing the public sector is enormous.

Eggers has a firm grasp on how we got here. Governments, including many in Oklahoma, have failed to contribute enough to retirement plans to fund all earned benefits and haven’t asked employees to contribute enough. They’ve expanded benefits when the stock market was strong and offered lucrative early retirement packages. And they’ve decided to worry about the imbalance later.

In Oklahoma, we pointed out that the funding needed to keep retirement systems afloat is sinking state budgets.

In the case of retirement costs, the employer contribution rate will rise to 15.5 percent in FY ’10, up from 14.5 percent in FY ’09 and 10.0 percent as recently as FY ’05.

This year, state agencies are paying $216 million–more than double the amount in FY ’04–for their share of pension funding. This is one reason state agencies cannot continually get flat funding and still maintain their services. There’s little alternative but to increase the contributions, however. The state’s FY ’08 Comprehensive Annual Financial Report reports that benefits already promised from the Oklahoma Teachers Retirement System are $9 billion more than current and future funding. It would take 54 years of contributions to pay for all of these benefits. Most other state and local pension systems are not sustainable in their present form, though we have made some progress. Oklahoma, like most other governments, will have to  increase funding and reform benefits. If we fail to do so, we’ll have two choices: raise taxes or cut into core public services that already fall short of the needs of a prosperous state. Here’s an earlier issue brief with the full rundown on Oklahoma’s state pension systems.

For now, Eggers leaves us peering over the cliff without a hang glider. When Part II, which promises options for fixing the problem, comes out, we’ll point it out.

The Oklahoman recently ran an editorial calling attention to the especially heavy toll that the current recession is having on male workers nationally and here in Oklahoma. A new issue brief from Economic Policy Institute, using data from the Bureau of Labor Statistics and Current Population Survey, provides some startling state-level data that bears out this point.

In the 4th quarter of 2007, which marked the onset of the national recession, Oklahoma’s unemployment rate was 3.4 percent for men and 4.2 percent for women. In the just-completed 2nd quarter of 2009, while the female unemployment rate had inched up a mere 0.2 percentage points to 4.6 percent, the male unemployment rate had soared 4.2 percentage points to 7.6 percent. Thus,  over a span of eighteen months, the job market switched from one where women were somewhat likelier than men to be unemployed to one where the male unemployment rate is a full three percentage points higher than that of women.

Oklahoma’s gender profile mirrors the national picture but in somewhat more extreme form.  Nationally, unemployment rates for females at the start of the recession were 0.2 percentage points higher than for males (4.9 percent compared to 4.7 percent), a smaller gender gap than in Oklahoma. Today, the male unemployment rate for men nationally is 3 percentage points higher for men than for women (10.7 percent compared to 7.7 percent), the same size gap as in Oklahoma.

The Oklahoman’s explanation for what has happened is persuasive and is echoed by others who have reported on the subject :

The recession is hitting hardest on sectors over which men have traditionally dominated — construction, heavy manufacturing, mining, etc. — and hitting the lightest on sectors where women have traditionally ruled — education, health care, government service.

Looking ahead, the gender gap is expected to worsen as unemployment levels remain high over the next year. EPI’s report includes projections for the 2nd quarter of 2010, when economic forecasters expect unemployment to peak. They predict Oklahoma’s unemployment rate will rise to 7.3 percent for all workers; for men, unemployment is projected to be 9.0 percent (a 1.2 percentage point increase from 2009), compared to 5.3 percent for women (a 0.7 percentage point increase from 2009).

EPI’s report also shows that ethnic minorities – African Americans and Hispanics – are being hurt worse than Whites during the downturn and that these disparities will also worsen over the next year. Due to inadequate sample sizes, EPI was unable to provide estimates of unemployment rates by ethnicity for Oklahoma.

The loss of male jobs during this downturn is likely to have far-reaching consequences for the economy, communities, and families that will take a long time to fully understand and address. Will we see  more men move into traditionally female occupations in the education and health care sectors? Will we see shifts in family formation and child-rearing roles if more women become the primary breadwinners? Let’s hope that policymakers start soon to think about these questions and begin to think about crafting solutions to ensure that the economy that emerges out of this downturn is one that provides opportunities for all.